Simple example of borrowing from equity to fuel consumption
A home equity loan and a home equity line of credit both provide money from the value of your home. But each one has its pros and cons.
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Question by Jron: What is a second mortgage and how can an owner and a bank or private investor benefit from it?
What situation would an owner use a second mortgage. How does the bank and the owner benefit from it?
Best answer:
Answer by brotherlove@sbcglobal.net
a second mortgage is when an owner has enough equity (market value of home less the first mortgage balance) in their home to take a second loan against the property.
owners can benefit because it can give them a low interest loan to make home improvements or meet other financial needs.
Lenders can benefit because the make money on the loan.
Add your own answer in the comments!
What is Second Mortgages?
A second mortgage is simply a new mortgage placed against a property where there is already a first mortgage loan in place. It would not replace the first mortgage but is added onto the property title as a second charge.
First mortgage lenders have priority over the second mortgage lender. If the property is sold or goes into default the first bonded holder is paid.
If the second mortgage were to go in to default, the secondly mortgage lender would basically have to pay off the first mortgage loan to gain access to their collateral.
Lenders, therefore, consider seconds to be riskier loans.
Are There Different Types of Second Mortgages?
There are generally two types of second loans
1. Home Equity Lines of Credit.
A home equity line of credit (HELOC) will be set-up with a maximum limit available for the homeowner to draw against. It usually has an open term and can be drawn upon like a credit teasing. You can normally access the funds by writing a cheque, making a cash withdrawal or completing an online account transfer. This type of am is used in cases where homeowners may need access to funds but they subsidize no interest on the funded till they withdraw them.
Most HELOCS are based on the banks prime rate and can be interest lone payments. Interest payments are made monthly on the outstanding balance for that month. There is considerable competition among banks and lenders for these HELOC mortgages.
2. Home Equity Loan
A more traditional second mortgage loan is the home equity loan. Home equity loans are fixed-rate loans with set payments each month. The interest rate is usually higher than that of a first mortgage but may be less than that of a HELOC. The benefit of the home equity loan is that it amortizes to a zero balance over the term of the loan. This type of loan is more common for people who need access to large amounts of funds at one time for such things as home renovations, large consumer purchases and college tuitions.
Your choice between these types of mortgages will depend on your individual needs, your budget along with the terms conditions imposed by individual banks or lenders.
Related Second Mortgage Articles
Question by Painted Jezebel: What happens to the second mortgage when the first mortgage forecloses?
I am going through a foreclosure on my first mortgage, what are my options with dealing with the second mortgage? Any legitimate websites with guides for dealing with the aftermath of foreclosure would also be appreciated.
Best answer:
Answer by Real Estate Guy
read this article. It should explain http://www.washingtonpost.com/wp-dyn/content/article/2008/04/11/AR2008041101914.html
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Question by buad0118: What happens to a second mortgage when a home is purchased at a foreclosure auction?
I am going to bid on a house at foreclosure and it has a 1st mortgage of $ 280K and a second of $ 70K. The lender on the first two mortgages is Decision One Mortgage. The lender at foreclosure is Countrywide. Does this mean that if I buy this house at foreclosure that I will ain additional money to the second mortgage or just the first mortgage and back taxes?
Best answer:
Answer by Karen R
If Countrywide is currently the 3rd bond and you buy it at their foreclosure sale you will be responsible for the 1st and 2nd mortages plus taxes.
What do you think? Answer below!
Earnings Outlook: J.P. Morgan offers clues to other bank results
Mortgage results may be lackluster and investors should watch lenders exposed to home equity, but credit cards may be strong and investment banking better than expected, Barclays Capital says.
Read more on Market Watch
Fed Proposes Minimum Mortgage Standards
NEW YORK (TheStreet) — The Federal Reserve is proposing to set minimum underwriting standards for consumer mortgages in an effort to place more responsibility on banks to make sure the people they lend to can realistically pay back those funds. It sounds like common sense, of course, but obviously the loose standards and gimmicky products, such as interest-only loans, were key players in the …
Read more on TheStreet.com
5 things to understand about your home loan
The recent mortgage meltdown should have driven home the lesson that understanding one’s home loan is critically important. However, most people fail to think about mortgages.
Read more on MSNBC
BD Nationwide Mortgage Offers a Convertible Home Equity Line of Credit with Options to Refinance Portions to a Fixed Rate Second Mortgage Loan
Encinitas, CA (PRWEB) August 29, 2006
BD Nationwide Mortgage introduces a smart home equity loan that can separate into several loans with both fixed and adjustable rates. BD Nationwide has released a new home equity product that boasts of a convertible home equity line of credit offering options for turning variable interest rates into fixed rate second mortgages. BD Nationwide proudly presents the “Fixed Rate HELOC Conversion Program.” This unique home equity program allows homeowners to convert portions of their adjustable rate equity line into fixed rate home equity loans. Another key feature is that these second mortgages allow you to keep the unused portion of the home equity line open, while fixing the interest rate for the specified portion. In that sense, the HELOC splits into two loans. (one loan is a fixed lump-sum loan and the other is an open end line of credit)
Conversion options are available to convert a portion or all of the home equity line balance to a fixed interest rate home equity loan. This program allows you to convert HELOC portions to fixed rate loan eight times during the draw period.
Advances for fixed second mortgage rates can be requested at anytime during the ten-year draw period: Three fixed rate advances may be open at any one time. The conversion feature limits you to a total of eight fixed rate advances may be requested over the draw period. In addition, there are no lending fees to convert to a fixed rate. Loan advance options are based on the balance requested.
Lynda Nelms, a Sr. Loan Officer and Mortgage Consultant at BD Nationwide, said, “This is a progressive loan that allows my borrowers to be savvy using their home equity when they see fit, while converting adjustable rate interest into a fixed rate second mortgage with a simple interest amortization.” Nelms continued, “These days I find homeowners need cash out for debt consolidation or home improvements, but they already have a large second mortgage.”
The Fixed Rate HELOC Conversion Program enables our clients to refinance and convert their existing line of credit into a fixed rate second mortgage, while opening up an additional revolving credit line they can access later. This home equity conversion loan is a great solution for the recent dilemma of refinancing jumbo home equity loans that seem to be so common with million dollar homebuyers. BD Nationwide Mortgage Company has partnered with many of the nations leading home equity lenders.
Home Equity Line of Credit Draw Period : 10 years
Second Mortgage Rate is a Variable Rate ( WSJ prime interest rate index plus margin)
Home Equity Loan Terms: 15, 20, 25 or 30-years
Second mortgage rates are fixed interest rates (fixed interest based on market conditions on the conversion date)
Home Equity Loan Repayment Terms:
Borrower may request a fixed rate advance from the customer care dept. after the lender funds the loan.
Fixed Rate Advance Option: Fixed-rate advance options can initially be requested by loan officer at the time of disclosures.
To learn more and get additional loan information, please visit: Second Mortgage & Home Equity Loans
About BD Nationwide Mortgage Company:
BD Nationwide Mortgage is a second mortgage broker with corporate headquarters in Encinitas, California. They specialize in refinance, home equity loans and credit lines for homeowners seeking debt consolidation or cash out. The company focus remains solidified with second mortgages for people with all types of credit. Always striving to offer “out of the box” loans, BD Nationwide Mortgage is determined to help expand financing solutions so more Americans can maximize the financial rewards of being a homeowner.
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Home Mortgage and Life Insurance Firm Offers a Variety of Mortgage Loan Solutions to Home Owners
(PRWEB) April 19, 2005
Original Mortgage Source, LLC, an Ohio-based company that specializes in home mortgage and life insurance options, has included information and application forms on their website for the most popular types of mortgage loans they offer to homeowners.
Original Mortgage Source, LLC provides two distinct types of mortgage loan solutions. The first, a 3.875% Equity Builder mortgage loan, is an interest-only program that helps homeowners free up money to pay other charging without refinancing their mortgage. Unlike the Prime Rate mortgage, the Equity Builder mortgage lent is unnatural by multiple economic factors, making it much more sheltering and keeping the interest rate lower. The interest rate is also not compounded annually.
The second mortgage loan, Mortgage Life Protection, is actually an inexpensive life insurance policy that provides number coverage to pay off the full amount of the mortgage should the homeowner die. This coverage can be adding to an existing mortgage without refinancing.
In addition to the Equity Builder and Mortgage Life Protection mortgage loans, Original Mortgage Source, LLC has several additional mortgage loan programs, including:
 100% Financing, for borrowers with good credit and employment histories but no down payment
 3% Down FNMA, designed to assist moderate income first time home buyers.
 Home Equity Lines of Credit (HELOC), for borrowers who wish to keep their first mortgage in place and use their equity for debt consolidations, purchase other properties, or home improvements.
 Mortgage Only Programs, enabling homeowners to qualify for a new bonded based only on their mortgage payment
 No Income Verification Loans for Self Employed or W2 employees
ÂOur policy is to provide pre-qualifications free of charge to all people serious astir purchasing or refinancing their homes, investment properties, or commercial properties, said Timothy A. Primavera Sr., President and CEO of Original Mortgage Source, LLC. ÂOur ultimate goal is to help our customer get what they want.Â
Original Mortgage Source, LLC offers a free two- to four-minute ÂQuick Mini-Application Form to apply for a home mortgage or life insurance online. To apply for a mortgage loan or to learn more about these and many other available mortgage lend programs, visit http://www.OriginalMortgage.net.
About Original Mortgage Source, LLC
Original Mortgage Source, LLC has been providing help to customers with home mortgage and life insurance needs. Their specialized staff of certified residential mortgage specialists and senior loan officers assist with mortgage loan programs, help with for-sale-by-owner homes, home warrantees, and offer consulting for homeowners and home purchasers alike, in both commercial and residential real estate.
Original Mortgage Source is a member of the Cleveland Better Business Bureau (BBB), the National Association of Mortgage Brokers (NAMB), the Ohio Association of Mortgage Brokers (OAMB) and the Ohio Farm Bureau Federation (OFBF). The Christian-owned and operated firm is state licensed, bonded, and insured to provide home mortgage loans and solutions for homeowners and home purchasers, regardless of credit history. They also offer many different types of life insurance coverage that can be browsed on there website.
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Senate panel rebukes Goldman Sachs , others
WASHINGTON • Goldman Sachs , which paid $ 550 million last summer to settle federal fraud charges from an offshore mortgage deal, failed to tell investors in a second, $ 2 billion bundle of risky mortgage securities that it was secretly betting on their default, a Senate panel charged Wednesday.
Read more on St. Louis Post-Dispatch
Banks must take indorse look at foreclosures – Army News | News from Afghanistan & Iraq – Army Times
The 8 large national bank mortgage servicers have been ordered to review all of their foreclosures within the last two years — to comprise looking at their compliance with the Servicemembers’ Civil Relief Act — after regulators found allegedly unsafe and unsound practices related to residential mortgage loan servicing and foreclosure processing.
Read more on Army Times
Quicken Loans Gives Mortgage Payment Away to Lucky Fan at Cleveland Cavaliers Fan Appreciation Night
The nation’s largest online mortgage lender will give $ 1,000 toward winner’s mortgage payment. (PRWeb April 13, 2011) Read the full story at http://www.prweb.com/releases/2011/4/prweb8302547.htm
Read more on PRWeb
Question by 27amDotCom: What to look for when shopping around for home equity loans?
Any advice on what to look for when shopping around for home equity loans?
Are there referral commissions?
I have a couple of individuals looking for a home equity loan … I told them I’d look into it for them. I’d like to find a quality vendor, but if referrals commissions are paid out, I’d like to negotiate for that too.
How do I figure out what is a “great deal”?
PS. I’ll happily take general replies but this would be specific to Calgary, Alberta, Canada.
Best answer:
Answer by greta
If you were in the US I’d say caretul you may be stepping into legal problems.
What do you think? Answer below!